The duration of business cycle expansions and contractions: are there change-points in duration dependence?
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The business cycles literature shows that the likelihood of an expansion or contraction ending increases with its age, i.e. they exhibit positive duration dependence. This evidence rests on the assumption that the magnitude of duration dependence is the same over time. However, we assume that the degree of likeliness of an expansion or contraction ending as it gets older might indeed change after a specific duration. Estimating a continuous-time Weibull model for a group of 13 industrial countries over the period 1948–2009 and allowing for the presence of a change-point in the duration-dependence parameter; we conclude that the evidence of positive duration dependence is no longer present when an expansion surpasses 10 years of duration.
KeywordsBusiness cycles Expansions Contractions Duration dependence
JEL ClassificationC41 E32
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